Since March, the China Securities Regulatory Commission (CSRC) and stock exchanges have released draft rules that will force companies to exit the equity market for serious law violations.

Earlier this month, the CSRC promised that China would step up efforts to delist “zombie companies” and those with long-term losses and severely poor financial status.

The regulator will also strengthen the responsibilities of stock exchanges in establishing and implementing delisting rules to improve the quality of listed companies and protect investor interests.

A week later, the Shanghai and Shenzhen stock exchanges responded with detailed draft rules, stipulating that companies will be ousted from the market if found of fraudulent initial public offerings, cheating in financial disclosures or law violations.

Asked whether the new delisting rules will lead to an increase in market exits, CSRC vice-chairman Jiang Yang said that everything should be done according to related laws and regulations.

The move came amid tougher market oversight and severer punishment for illegal trading in recent years, especially after the market rout in 2015 that shattered confidence among the country’s stock investors, most of whom are retail traders with little financial expertise.

While rapidly growing in size, the A-share market is struggling with problems such as inadequate implementation of delisting policies, which keeps dysfunctional companies in the field and undermines market confidence.

Since the first delisting in 2001, China’s A-share market has only seen 57 firms exit the market despite a reform of delisting rules in 2014, according to Wind, an information service provider.

Last week, the CSRC said from 2013 to 2015, Kunming Machine Tool had exaggerated its revenue and net profits by 480 million yuan ($76 million) and 230 million yuan, respectively.

“The capital market needs a virtuous mechanism for both entries and exits to ensure healthy flows in the system,” noted Chen Hua, economics professor at Shandong University of Finance and Economics.

In addition to revising delisting rules, the CSRC has moved forward to reform the IPO application system.

To curb market irregularities, the CSRC last October set up a new committee in charge of reviewing IPO applications. The committee has the ultimate say in deciding whether a company is qualified to go public in China. It also regulates fraud.

While guarding the door for uncompetitive companies, China is encouraging listings in the new technology and new economy sectors.

In recent weeks, regulators signaled that they would fast-track new listings by unicorn companies — startups valued at more than $1 billion — to invigorate the country’s capital market and foster the new economy.

With the improved system for both listing and delisting, China’s capital market will become increasingly mature, according to analysts.

China had more than 3,500 listed firms, with a total value nearing 58 trillion yuan as of the end of last week.